Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 3155693 times)

SnarkyPuppy

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12710 on: June 12, 2019, 05:58:38 AM »
New article today
https://www.wsj.com/articles/regulator-to-press-congress-to-act-on-mortgage-finance-revamp-11560337204?redirect=amp#click=https://t.co/rPGBeVanRR

Its becoming increasingly clear that the administrations plan to reduce recapitalization execution risk and attract "private capital" is to ask congress to implement changes prior to a clearly defined recap start date. 
- Regardless of whether congress acts, there will be some form of guarantee (explicit securities based guarantee from congress  or moelis backstop administratively). 
- One wildcard is increased competition via changes to charters - but fnma/fmcc if nothing else have a head start with infrastructure, timing, brand, IP, and existing business portfolio - see cherz comments above for more in why this isn't necessarily the end of the world scenario.  For years FMCC securities traded at a discount to FNMA securities for no clear reason other than brand.  Potentially...this applies to non FNMA/FMCC in the same manner

By communicating a clearly defined start date for administrative-only recap, the admin is signaling to the market that it recognizes the "legislative risk" that private capital clearly cares about,  but is also basically providing congress with a deadline.  Implicit in this structure is the hope that if congress can't enact anything with a deadline in place, the market will  be incrementally more comfortable that there won't be any changes

And.... FHFA recommendations for legalislative action came out this morning.

https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-2018-Report-to-Congress-Includes-Legislative-Recommendations.aspx
« Last Edit: June 12, 2019, 06:00:32 AM by SnarkyPuppy »


investorG

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12711 on: June 12, 2019, 06:28:04 AM »
New article today
https://www.wsj.com/articles/regulator-to-press-congress-to-act-on-mortgage-finance-revamp-11560337204?redirect=amp#click=https://t.co/rPGBeVanRR

Its becoming increasingly clear that the administrations plan to reduce recapitalization execution risk and attract "private capital" is to ask congress to implement changes prior to a clearly defined recap start date. 
- Regardless of whether congress acts, there will be some form of guarantee (explicit securities based guarantee from congress  or moelis backstop administratively). 
- One wildcard is increased competition via changes to charters - but fnma/fmcc if nothing else have a head start with infrastructure, timing, brand, IP, and existing business portfolio - see cherz comments above for more in why this isn't necessarily the end of the world scenario.  For years FMCC securities traded at a discount to FNMA securities for no clear reason other than brand.  Potentially...this applies to non FNMA/FMCC in the same manner

By communicating a clearly defined start date for administrative-only recap, the admin is signaling to the market that it recognizes the "legislative risk" that private capital clearly cares about,  but is also basically providing congress with a deadline.  Implicit in this structure is the hope that if congress can't enact anything with a deadline in place, the market will  be incrementally more comfortable that there won't be any changes

good post, thanks. 

mnuchin is likely concerned with 2 things more than Tsy's $$ take:

a) try not to disrupt the agency mbs market for global investors. this seemingly requires either an explicit (congress) or implicit (ongoing committment fee) backstop, preferably the former.

b) minimize failed deal risk in a potential transaction(s).  ~$100bn is a lot to raise.  congressional blessing would help, hence the delicate dance that's going on now.  I guess it's well orchestrated with calabria as the main public face given his skills, time, and relative lack of relationship baggage.   even if the congressional route goes nowhere, it provides some political cover.


cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12712 on: June 12, 2019, 08:24:18 AM »
this was posted on Tim howard' blog:

"Tim

this WSJ article is germane to your last comment: https://www.wsj.com/articles/regulator-to-press-congress-to-act-on-mortgage-finance-revamp-11560337204?mod=hp_lead_pos6

the gist is that calabria is going to send to congress some to-do items that calabria wants congress to act on, such as giving calabria power to charter additional guarantors (much like banking regulators can charter additional banks), and enacting some form of mbs govt guarantee. the article identifies the guarantee as something that should improve mbs pricing, which therefore should make a recapitalization somewhat easier to execute. calabria also intimated that the treasury plan will identify separate admin and congressional tracks for reform.

my takeaway from the article is that both calabria and mnuchin are prepared to take admin action to implement reforms (to be identified in detail next week) that they have the power to implement, while suggesting congressional action that could be layered onto admin action that would seem to improve their ability to execute a capital raise and release GSEs from conservatorship.

the article also referred to an interview with sen. brown in which he said his prior objection to SBC proposals was that they were “Rube Goldberg-esque”, which may even be an understatement. one may think that if any congressional action is done (ie brown…and even the HFSC goes along), it will be more limited in scope to what calabria and mnuchin will request.

since the article stated that calabria would be presenting his to do list to congress next week, I would assume that would be the timing we would expect for the treasury plan. so yes we wait for the details, but I find this article to provide more coherence to Bloomberg’s recent misleading article on Mnuchin’s statements

rolg"

I wonder if you guys think this is a fair reading, or too polyanna-ish

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12713 on: June 12, 2019, 08:28:16 AM »
New article today
https://www.wsj.com/articles/regulator-to-press-congress-to-act-on-mortgage-finance-revamp-11560337204?redirect=amp#click=https://t.co/rPGBeVanRR

Its becoming increasingly clear that the administrations plan to reduce recapitalization execution risk and attract "private capital" is to ask congress to implement changes prior to a clearly defined recap start date. 
- Regardless of whether congress acts, there will be some form of guarantee (explicit securities based guarantee from congress  or moelis backstop administratively). 
- One wildcard is increased competition via changes to charters - but fnma/fmcc if nothing else have a head start with infrastructure, timing, brand, IP, and existing business portfolio - see cherz comments above for more in why this isn't necessarily the end of the world scenario.  For years FMCC securities traded at a discount to FNMA securities for no clear reason other than brand.  Potentially...this applies to non FNMA/FMCC in the same manner

By communicating a clearly defined start date for administrative-only recap, the admin is signaling to the market that it recognizes the "legislative risk" that private capital clearly cares about,  but is also basically providing congress with a deadline.  Implicit in this structure is the hope that if congress can't enact anything with a deadline in place, the market will  be incrementally more comfortable that there won't be any changes

And.... FHFA recommendations for legalislative action came out this morning.

https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-2018-Report-to-Congress-Includes-Legislative-Recommendations.aspx

fhfa recs for congressional action is not a line item in the table of contents.  anyone find it?

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12714 on: June 12, 2019, 08:30:57 AM »
New article today
https://www.wsj.com/articles/regulator-to-press-congress-to-act-on-mortgage-finance-revamp-11560337204?redirect=amp#click=https://t.co/rPGBeVanRR

Its becoming increasingly clear that the administrations plan to reduce recapitalization execution risk and attract "private capital" is to ask congress to implement changes prior to a clearly defined recap start date. 
- Regardless of whether congress acts, there will be some form of guarantee (explicit securities based guarantee from congress  or moelis backstop administratively). 
- One wildcard is increased competition via changes to charters - but fnma/fmcc if nothing else have a head start with infrastructure, timing, brand, IP, and existing business portfolio - see cherz comments above for more in why this isn't necessarily the end of the world scenario.  For years FMCC securities traded at a discount to FNMA securities for no clear reason other than brand.  Potentially...this applies to non FNMA/FMCC in the same manner

By communicating a clearly defined start date for administrative-only recap, the admin is signaling to the market that it recognizes the "legislative risk" that private capital clearly cares about,  but is also basically providing congress with a deadline.  Implicit in this structure is the hope that if congress can't enact anything with a deadline in place, the market will  be incrementally more comfortable that there won't be any changes

good post, thanks. 

mnuchin is likely concerned with 2 things more than Tsy's $$ take:

a) try not to disrupt the agency mbs market for global investors. this seemingly requires either an explicit (congress) or implicit (ongoing committment fee) backstop, preferably the former.

b) minimize failed deal risk in a potential transaction(s).  ~$100bn is a lot to raise.  congressional blessing would help, hence the delicate dance that's going on now.  I guess it's well orchestrated with calabria as the main public face given his skills, time, and relative lack of relationship baggage.   even if the congressional route goes nowhere, it provides some political cover.

I agree with this completely.  I also imagine that calabria/mnuchin have a good idea what senator brown might be in favor of, as a way of focusing the congressional ask in a way that actually improves chances for passage...and that ask will likely be capital raising enhancements rather than barriers

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12715 on: June 12, 2019, 08:50:22 AM »
New article today
https://www.wsj.com/articles/regulator-to-press-congress-to-act-on-mortgage-finance-revamp-11560337204?redirect=amp#click=https://t.co/rPGBeVanRR

Its becoming increasingly clear that the administrations plan to reduce recapitalization execution risk and attract "private capital" is to ask congress to implement changes prior to a clearly defined recap start date. 
- Regardless of whether congress acts, there will be some form of guarantee (explicit securities based guarantee from congress  or moelis backstop administratively). 
- One wildcard is increased competition via changes to charters - but fnma/fmcc if nothing else have a head start with infrastructure, timing, brand, IP, and existing business portfolio - see cherz comments above for more in why this isn't necessarily the end of the world scenario.  For years FMCC securities traded at a discount to FNMA securities for no clear reason other than brand.  Potentially...this applies to non FNMA/FMCC in the same manner

By communicating a clearly defined start date for administrative-only recap, the admin is signaling to the market that it recognizes the "legislative risk" that private capital clearly cares about,  but is also basically providing congress with a deadline.  Implicit in this structure is the hope that if congress can't enact anything with a deadline in place, the market will  be incrementally more comfortable that there won't be any changes

And.... FHFA recommendations for legalislative action came out this morning.

https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-2018-Report-to-Congress-Includes-Legislative-Recommendations.aspx

incoherence in the release notes to the fhfa 2018 report to congress:

"In the report, FHFA Director Mark Calabria encourages Congress to act on housing finance reform while also requesting chartering authority similar to the Office of the Comptroller of the Currency. “There is urgent need for Congress to act on housing finance reform. To promote competition in the marketplace, I encourage Congress to authorize additional competitors and provide FHFA the same powers as other federal financial regulators."

The legislative recommendations outlined in the letter include:

Acting on housing finance reform;
Increasing competition; and
Strengthening the FHFA's regulatory powers."

what letter? doesn't seem to be in report either.

DRValue

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12716 on: June 12, 2019, 08:53:34 AM »
New article today
https://www.wsj.com/articles/regulator-to-press-congress-to-act-on-mortgage-finance-revamp-11560337204?redirect=amp#click=https://t.co/rPGBeVanRR

Its becoming increasingly clear that the administrations plan to reduce recapitalization execution risk and attract "private capital" is to ask congress to implement changes prior to a clearly defined recap start date. 
- Regardless of whether congress acts, there will be some form of guarantee (explicit securities based guarantee from congress  or moelis backstop administratively). 
- One wildcard is increased competition via changes to charters - but fnma/fmcc if nothing else have a head start with infrastructure, timing, brand, IP, and existing business portfolio - see cherz comments above for more in why this isn't necessarily the end of the world scenario.  For years FMCC securities traded at a discount to FNMA securities for no clear reason other than brand.  Potentially...this applies to non FNMA/FMCC in the same manner

By communicating a clearly defined start date for administrative-only recap, the admin is signaling to the market that it recognizes the "legislative risk" that private capital clearly cares about,  but is also basically providing congress with a deadline.  Implicit in this structure is the hope that if congress can't enact anything with a deadline in place, the market will  be incrementally more comfortable that there won't be any changes

And.... FHFA recommendations for legalislative action came out this morning.

https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-2018-Report-to-Congress-Includes-Legislative-Recommendations.aspx

incoherence in the release notes to the fhfa 2018 report to congress:

"In the report, FHFA Director Mark Calabria encourages Congress to act on housing finance reform while also requesting chartering authority similar to the Office of the Comptroller of the Currency. “There is urgent need for Congress to act on housing finance reform. To promote competition in the marketplace, I encourage Congress to authorize additional competitors and provide FHFA the same powers as other federal financial regulators."

The legislative recommendations outlined in the letter include:

Acting on housing finance reform;
Increasing competition; and
Strengthening the FHFA's regulatory powers."

what letter? doesn't seem to be in report either.

There doesn't seem to be much more substance than that, just the comments in his introductory letter of the report.
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Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12717 on: June 12, 2019, 09:08:45 AM »
fhfa recs for congressional action is not a line item in the table of contents.  anyone find it?

The report reads as if everything but the introduction was just copied and pasted, with appropriate adjustments, from the Watt-era reports. As Calabria mentions, June 15 is the statutory deadline, so I wouldn't read too much into the contents. Other than the introduction I think it's just a TPS report.

Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12718 on: June 12, 2019, 09:12:50 AM »
...I think it's just a TPS report.

Invest for retirement?  Sure.  But investing in eternity is infinitely more important.  Don't get it twisted.  "...but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal."  Matthew 6:20

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12719 on: June 12, 2019, 09:33:40 AM »
fhfa recs for congressional action is not a line item in the table of contents.  anyone find it?

The report reads as if everything but the introduction was just copied and pasted, with appropriate adjustments, from the Watt-era reports. As Calabria mentions, June 15 is the statutory deadline, so I wouldn't read too much into the contents. Other than the introduction I think it's just a TPS report.

there is a 3 page intro letter which talks about competition and refining capital setting process to avoid undesirable workarounds...not sure what that's about